The Auto Bubble and the Apple car

In the U.S., dealership lots and ad papers swell with recent model used cars in great condition. Sometimes near-working vehicles are abandoned. People around us choose to buy new cars they can’t really afford every day, or at least they were.

Does this look sustainable?

used cars on a dealership lot

My father’s official career was education, but a large part of our family’s income had always come from restoring and flipping vehicles. If I recall correctly, as many as eight at a time. Within moments of seeing a car he knows what the seller will take in cash, repair labor and parts costs and their sources, and likely resale value. This includes cars that the owners don’t know are for sale until my dad offers cash in hand; if the deal looks good why wait for it to go on the market?

Part of the reason we had savings was never driving new. When you know resale values, buying new is more clearly seen as the terrible investment it always has been. A 12 month warranty for a $10K drop in value means the warranty costs you $833/mo. Ouch.

The U.S.’s auto industry was surely sustainable at some point in history, but I believe we’re now seeing the bursting of an auto bubble due to a long period of over production, just like we saw in housing. I see more cars in good condition in circulation than we can hope to drive. When our saving and thrifting culture returns, the auto market will start to look less like modern dealerships and more like my dad’s driveway. We’ll drive cars longer and, like our family always did, trade them every few years just to drive something “new” for a while. The many people who do this with new cars have fueled the auto makers and given the rest of us newer used cars to enjoy, but they’re finding themselves tens of thousands in debt. Fear is waking people up for the moment, but I believe consumer credit will eventually dry up and reduce this naturally.

In this view I see an auto bailout as a wasteful prolonging of the inevitable. What will people do when the Big Three fail? The foreign auto makers with domestic plants may take up a little slack, at least temporarily; we’ll need some number of new vehicles to start the transition to alt-fuels. In general we’ll probably need to start making things that we can use here. Since the world is rapidly becoming more educated we can’t export knowledge work forever…but that’s for another discussion.

One of the better ideas I’ve seen floating around is to bring a lot more standardization to the car. If we could commoditize parts, we could build cheaper, maintain longer, and bring about an industry of easier owner customizations. When IBM standardized they lost the PC manufacturing war, but it blew up the PC market. We’ve always seen cars as envisioned by a hand-picked few, but what if the electric car could be cheap to buy, with parts that (more or less) snap together from 1,000s of sources, and be completely customizable according to your desire or budget. A remix auto culture?

In a way, we’ve been driving Apple cars; perhaps more beautiful, but unaffordable for the country in practice. A PC car industry would be cheap enough to get us off oil faster, and nimble enough make transitions to other fuels down the road less painful.

One thought on “The Auto Bubble and the Apple car

Leave a Reply